Mindspace Business Parks REIT (MINDSPACE) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Mindspace Business Parks REIT Earnings Call for Q1 FY '27 Financial Results. [Operator Instructions]. Please note that this conference is being recorded. With that, I hand over the call to Mr. Shravan Kailasa from Mindspace Business Parks REIT. Thank you, and over to you. Please go ahead.

Yes. Good afternoon, everyone. And thank you for joining the earnings call for quarter 1 financial year 2027 for Mindspace Business Parks REIT. At this point, we would like to highlight that the management may make certain statements that may be forward-looking in nature. Please be advised that our actual results may differ materially from these statements. We do not guarantee these statements or results and are not obliged to update them at any point of time. I would now like to welcome our CEO and MD, Mr. Ramesh Nair; CFO, Ms. Preeti. Chheda; and Mr. Govardhan Gedela, Head Corporate Finance, who will take you through the business updates and the financial performance during the quarter. We will then open the call to a round of Q&A. I will now hand over the call to Ramesh.

Thank you, Shravan. Sorry for the slight delay in starting this call. Good afternoon, everyone. Thank you for joining us today. Q1 FY '27 has been a very strong quarter for us. We achieved gross leasing of 0.9 million square feet during this quarter. The portfolio's committed occupancy stood at 95.8% on a like-to-like basis and including the new acquisition, it stands at 92.1%. The strong growth momentum is reflected in our financials. Net operating income grew by 27.8% year-on-year to INR 788 crores for the quarter. Distribution for the quarter increased by 25.2% year-on-year. Distribution per unit for quarter 1 FY '27 stood at INR 6.67, the highest ever. This is a year-on-year growth of 15.2%. Building on this momentum, happy to share that we have launched two new office projects and two new hotels. We have 4.7 million square feet of under construction office assets due for delivery over the next 12 months. Most of this is pre-committed. Happy to also announce that we are launching a new building, Building B12 in our Airoli West Park. The park is currently at 98% occupancy, and this will add another 1.1 million square feet to the park. Similarly, we are adding another 0.4 million square feet of office in Commerzone Yerwada, where we have a vacancy of only 54,000 square feet. Very happy to announce that we are adding two new hotels in Hyderabad and Pune, which are pre-committed. The Pune hotel is a greenfield development, while in Hyderabad, we are repurposing an office block. This is in line with our strategy to create integrated campus ecosystems. With this, our portfolio expands to 46.2 million square feet with 10 million square feet at various stages of approvals and development. We are also on the lookout for more redevelopment opportunities in Hyderabad and data center development opportunities in Navi Mumbai. This quarter, we also concluded the acquisitions of Commerzone Pallikaranai and International Tech Park Chennai, Radial Road, which we have now rebranded as One Radial. We have already signed a deal at 87 at One Radial and are currently in final stages of closing multiple deals between 85 and 90 in both these parks. We are also in advanced discussions for closing 450,000 square feet with the global BFSI GCCs. Coming to Madhapur, rentals continue to trend upward. We've been negotiating deals at almost 130 as of last quarter. The average rent of the park is INR 80. This shows the mark-to-market potential sitting in our portfolio. We are very optimistic about the path ahead as we continue to buy well, as we build and enhance our existing portfolio. Now I'd like to share highlights from various IPC and other research reports. JLL stated that India's office net absorption in H1 2026 rose to nearly 27 million square feet, up nearly 12% year-on-year. For the quarter, net absorption stood at 13.2 million square feet. New completions totaled nearly 23 million square feet in H1. Relevant vacancy fell to 9.9%. Mumbai posted its lowest vacancy levels in 15-plus years. The CBRE report talked about how gross office absorption reached a record 45.5 million square feet, absorption increasing nearly 10% year-on-year. GCCs accounted for 43% of leasing. GCC deal volumes increased 30% year-on-year. GCCs drove 53% of deals above 100,000 square feet. India's office stock surpassed the 1 billion square feet mark and institutional Grade A constitute around 30% of the stock. I'd also like to highlight an interesting report that I came across from CRE Matrix from the Chennai market, which spoke about how Chennai is the fastest-growing GCC hub among Tier 1 cities. The city having 400-plus GCC units, employing 2.1 lakh plus professionals, demand-supply ratio of 1.8x, the healthiest among South India's major office markets, meaning new supply is backed by real absorption, not just speculation. Office rentals also in Chennai are nearly 20% below Bangalore, which while remaining institutional grade, a durable cost to quality propositions for GCCs to scale up. Chennai also has the lowest attrition of any Tier 1 city. This means tenant workforces are stable and less likely to churn or downsize space. There is a INR 63,000 crores of metro investment in Chennai, which is the highest among all Tier 1 cities with Phase 2 set to unlock the next wave of GCC campus development. Chennai is also now India's second largest data center market, with landing point for six submarine cables, diversifying the demand base beyond traditional office. All this augurs well for us given our growing interest and recent investments in this market. While the quarter started with some volatility, it improved during the latter half of the quarter. Geopolitical tension in the Gulf and pressure on oil resulted in costs moving upward. In spite of that, on ground, this was the strongest first half the Indian office market has ever recorded. The demand did not disappear, it paused and bounced back. Global companies have come in, demand for GCCs grew close to 40%. A weaker rupee is also part of the story. For a company earning in dollars, India has become more cheaper and as our infrastructure and talent have only improved. Mindspace Madhapur committed occupancy stayed consistently at a very healthy 99% plus. At Mindspace Airoli West, we stabilized occupancy at 98% plus. These two are the largest assets in our portfolio, and these are essentially full. Out of the 68 buildings in our portfolio, 45 have an occupancy over 99%, 49 over 96% and 55 buildings over 90%. Let's look at a little bit of a development update of our assets. In Airoli East, committed occupancy has risen to 84.5%. Upgrade work in buildings B1, 9, 10, 11, 12 has made much progress and will conclude this quarter. Amongst other things, the lobbies will be a lot more sophisticated, functional, suited to best-in-class parks across the country. Client feedback has also helped shape our infrastructure plans. We are building covered walkways across the park to create more comfortable connected experience for our occupiers. There's also the foundation work, which has commenced for a B17, our 9 lakh square feet mixed-use development. This comprises a 3 lakh square feet Hyatt Regency Hotel and a 6 lakh square feet office building. At Mindspace Airoli West, we have submitted plans to construct a new building spread across 1.1 million square feet. We are calling this B12. Recent deals in Airoli are being signed at INR 75 plus. This progress strengthens our confidence in Navi Mumbai's growth and our long-term plan for this micro market. As you are aware, Mindspace is the only Indian-listed REIT with a data center portfolio. Two data centers are already operational, and the next one gets ready in Q4 FY '27 and the other in Q2 FY '28. Upon completion, our data center portfolio will span approximately 1.7 million square feet. In Mindspace Madhapur, our business park spans nearly 10 million square feet and the occupancy levels are 99%. This means 115,000 square feet of vacancy and Madhapur is operating at near full capacity. We have also begun trials at the Pearl Club, our flagship members exclusive club, which will soon open for membership. Also happy to report that Pearl Club in Hyderabad has become India's first project to achieve platinum certification under the IGBC New Buildings Version 4 Rating System. This positions it as a benchmark for sustainable ESG-led development in the country. For B1, we have applied for a Part OC. This is a building which has been fully leased to a global banking GCC, while the terrace work for B8 has been completed. This again has been fully pre-let. At B18, which is again pre-let for a Ritz-Carlton, foundation work has begun, and we have implemented precast construction technology. We are excited that we are pouring concrete in the supply start market backed by confidence to build more. In Pune, we renewed a 350,000 square feet lease at The Square on Aundh Road with a leading global fintech GCC, highlighting the strong occupier satisfaction and long-standing relationship we have built with our tenants. Separately, we also purchased 52,000 square feet in Commerzone Yerwada, taking the total acquisitions in the park during the last one year to 140,000 square feet. On the client centricity front, in Q1, we continued to strengthen tenant engagement through various B2C activities under the IP Mindspace Delightful Days. Our Hyderabad assets clear the British Safety Council's Fire Safety Audit for 2026. We have also been pushing carpooling hard in all our campuses. Our EV charging network is live across all our Hyderabad assets, and we are ensuring greener mobility is built in. On the people front, happy to share that Mindspace REIT has been recognized amongst the 100 Great Place to Work. This is an outcome of our people-first policies. On the ESG and sustainability front, we closed FY '26 GRESB assessment, published our FY '26 ESG report and secured BRSR Core Assurance. Happy to share that we've been accepted as the UN Global Compact Participant, reaffirming our commitment to its 10 principles on human rights, labor, environment and anticorruption. Seven buildings across Commerzone, Yerwada and Kharadi have earned WELL Gold certification. Mindspace Madhapur B8 achieved WiredScore Platinum, recognizing best-in-class digital connectivity and smart infrastructure. In partnership with Navi Mumbai Municipal Corporation and Project Mumbai, our plastic and e-waste Recyclathon engaged employees, tenants and the local community through multiple initiatives this quarter. Let's talk something increasingly critical to our business, Artificial Intelligence first on the business and what we believe is the impact on the real estate portfolio. We are strategically investing in AI to strengthen operational efficiency, regulatory compliance and investor communications. We're not chasing technology but solving real business problems. These initiatives reduce manual effort, minimize errors and free our teams for high-value strategic work. On the financial side, we have automated rent roll data conversion into leasing cash flow numbers. We are validating our filings against all REIT regulations with of publishing, catching errors and regulatory gaps early. On legal and compliance, we have deployed an AI platform for document review and regulatory analysis. We automated our quarterly SEBI compliance validation. The system now flags what's required and what's satisfied. We also monitor SEBI and MCA updates automatically, alerting teams to changes without manual surveillance. Together, these initiatives free our teams from routine work to focus on strategic analysis, stakeholder engagement and value creation, always with the highest standards of accuracy and governance. On the impact of AI on office leasing, we've been tracking that the lease tenures are definitely not shortening. So there's not been an impact there. Lease pre-commitments again have not reduced. India's cost advantages of talent and real estate continues. We believe AI will increase demand for higher-value human work, not less office demand. Companies still need teams collaborating, innovating, managing clients, making decisions and training young talent. All these activities are office intensive. We also believe that AI will create new office occupiers. Just as that created new office demand over the last decade, AI companies and AI-enabled service firms become incremental office tenants. AI is also driving productivity, which supports business expansion, more productive firms often grow faster, win more business and eventually employ more people despite automation. AI adoption itself will require office-based teams. Large organizations will need cross-functional teams working together to redesign processes, train models and govern data. That often increases collaboration needs. Office work is becoming more collaborative, not less. The office is shifting from a place where individual processing to a place for collaboration, culture, mentoring and innovation. This strengthens the case for quality offices. AI will actually increase demand for premium offices. Companies will concentrate talent into better workplaces that attract and retain top performers. Flight to quality could accelerate. We are already seeing this in many Western markets. AI is heavily data dependent. This supports growth for data centers, cloud infrastructure and various technology teams, and we've been beneficiaries of this with our data centers with data centers in our portfolio. AI, we believe, is currently an augmentation technology rather than a replacement technology. In conclusion, before I close, I want to mark a special milestone. Tomorrow Mindspace REIT completes six years since listing, six years of building trust with our unitholders, six years of disciplined growth, resilient occupancy and a portfolio that keeps getting stronger. We have grown into one of India's leading office REITs, and we have done it while staying true to our principles of quality, governance and long-term value creation. Thank you for your continued confidence in Mindspace REIT. I'll now hand it over to Preeti for further financial updates of the quarter.

Thank you, Ramesh. Good afternoon, everyone. We continue to deliver yet another quarter of strong financial performance backed by strong operating performance. Robust leasing, as explained by Ramesh, increasing occupancies, healthy re-leasing spreads, contractual escalation, strong rental growth have all helped our like-to-like NOI for Q1 FY '27 growth 16.2% Y-o-Y. Our overall Q1 FY '27 NOI, which has grown 27.8% year-on-year to INR 7,880 million. Revenue from operations for Q1 FY '27 increased by 26.4% Y-o-Y to INR 9,509 million. We have also demonstrated a track record of delivering healthy distribution growth. As you would see, we have delivered double-digit DPU growth over the last seven consecutive quarters. In fact, this quarter, our distribution saw a strong growth of 25% Y-o-Y. This translated to a DPU of INR 6.7 per unit, a growth of 15% Y-o-Y. On a like-to-like basis as well, the DPU grew 15.6% Y-o-Y. Our portfolio in-place rent today stands at INR 81 per square foot per month with a healthy mark-to-market opportunity of almost 20%, providing visibility for future rental growth. It's important to note that our portfolio has seen significant expansion since listing through both organic development and inorganic acquisitions. At the time of listing, we started with 29.5 million square feet of portfolio, which has over the last six years, grown to 46.2 million square feet. Of this, 7.5 million square feet was added organically through redevelopments, optimizing FSI by new buildings, et cetera. We also successfully acquired 9.2 million square feet from both sponsors and third parties. As Ramesh mentioned, we have a strong development pipeline within the portfolio of 9.5 million square feet, which, together with vacant area leasing, contractual escalations, MTM rental growth shall add almost INR 17 billion to INR 18 billion to our NOI in the next three years. On the debt side, we have maintained a good balance between leverage and growth. Our well-managed balance sheet helped us grow the portfolio through accretive acquisitions, at the same time, keeping our LTV at comfortable levels. Our LTV as on June 26 was almost 30% post recent acquisitions. Our cost of debt remained largely flat sequentially at 7.42% PAPM. We may see some increase in funding costs depending on how the macroeconomic and interest rate environment evolves over the coming quarters. You would have seen the recent tax bill proposing amendments to certain REIT tax provision, which has a very positive development for REITs. The proposal enables REITs to move to new tax regime with an additional surcharge but without losing the distribution tax exemption in the hands of unitholders, which is crucial to maintain attractiveness of this instrument. Also permitting carry forward of MAT credit should help utilization in the new regime. We are thankful to the government for these proposed reforms, which I believe will go a long way in the growth of these instruments in the country. To conclude, Mindspace REIT has in the last six years, demonstrated healthy long-term returns. Our total unitholder return CAGR of 15.9% over the last six years reflects Mindspace REIT's ability to generate healthy long-term returns for its unitholders. We shall work to maximize returns for our investors with efficient management of our operating assets, development strategies, our upgrade programs, which make our assets preferred choice for our tenants, optimal capital structure and a robust governance structure. With this, I hand over the call to the operator to open the floor for questions.

[Operator Instructions] Taking our first question now from Karan Khanna of AMBIT Capital.

Firstly, Ramesh, in a recent interview, you spoke about GCCs offering stable income visibility as well as longer tenures. So given that context, can you talk a bit more about GCC contribution in your revenue mix? And more importantly, absolute rental per square feet, how is that different for GCCs versus non-GCCs? And how has that changed the WALE across your portfolio? And as a follow-up, amid all that's going on in West Asia, how are incremental trends that you're seeing in terms of interactions and these closures, specifically with your MNC tenants?

So today, GCCs current contribute around 53.2% of our rentals. We also looked at who are the other people within the IT services. And we realized that foreign MNCs today have close to 18% of our rentals. In that foreign MNCs 18%, around 9% is IT services. And the domestic Indian MNCs, again, is around 26% in that, again, 9%. So 9% of foreign third-party IT services and 9% of Indian IT services, that's around 18% of IT services. This used to be late 20s, mid-20s a couple of two, three years back. So that's kind of come down. So for us, we've been big beneficiaries of Hyderabad being the most sought after GCC destination. In the last two years, every data point which has come up, all the IPC reports, various NASCOM reports show that in a year, at least 100 GCCs, new GCCs enter the market and nearly 46% of them have chosen Hyderabad. So again, we have benefited there given all the supply we had there. The very fact that both are under construction buildings B1, 1.5 million square feet fully pre-leased to GCC and B8, which is again pre-leased to four GCCs. So that's on our portfolio. On the West Asia, the front, April was a little slow month because people were not traveling, decisions were not being taken. But that kind of changed from May onwards. It's kind of back to normal. A lot of people who had slowed down decisions in April kind of came back and closed those deals in May and June. There was a few discussions around a little bit of cautious CapEx deployment. That's also now behind us. And whatever little slowdown we saw in decision-making is kind of, like I said, behind us. We saw a little bit of cost increase around 6.5% is what our procurement teams tell me in terms of, so most of this cost increase came in RMC, tiles, marbles, paints. These are some of the items which contributed to that 6.5% construction cost increase.

Sure. And secondly, Ramesh, if you look at the kind of leasing traction that we've seen over the past year, 1.5 years, in addition to GCC, I think two segments have really been driving a lot of the leasing. One is leasing hotel assets. So today, you have about 1.5 million square feet which is already leased to hotel assets that Chalet owns. Secondly, if I look at the 0.9 million square feet of gross leasing during the quarter, including 0.2 million square feet of new leasing, it appears most of it is happening to the co-working players. So, if you can talk a bit about both the hotels and co-working in terms of the IRRs and the lease terms. And when you think about future expansion, say, in Chennai, would you also look to scale up hotels in this market? And in terms of all your expansion in hotels, will it be through Chalet itself? Or will you be looking to partner with other hospitality players as well?

So from a leasing traction point of view, Flex, last quarter, I was reading various IPC reports, I think around 27% of the demand was in Flex. Although our portfolio currently stands at around 8.5% of the total space we have leased to Flex players. Three things on the flex market. Today, a lot of clients are also asking us if we could offer a flex solution for them. We know how to build, we know how to manage, we know how to lease. So those inquiries are coming. We have already been doing fitted out deals for our clients for many years. So there's no big rocket science around that. And we have the internal capabilities to offer those flex deals to our clients. On the hospitality side, currently, including the announcements, we have close to 1.5 million square feet, totaling the five hotels which we already have in the portfolio. This will be close to 1,150 keys. We have a very good relationship with Chalet. All these deals are done at arm's length, fully evaluated by various independent valuers and consultants. We are open to doing deals with other players also. Hotel kind of opportunities in Chennai, we still need to evaluate those.

We are taking our next question now from Deep Shah of 360 One Capital.

So, the first question is actually on your opening commentary where you said that Madhapur, you are even testing the waters at 130. Last quarter, we had seen leasing at 120. And I see that there are very little expiries. So is this for that small portion of space which is there? Or is this for early renewals? The context is if this is for early renewals, it just shows so much more confidence in the market that tenants are coming and happy to discuss even at these rates even when the renewal is not due. So if you could give some more color on it, that would be very useful.

Yes, you would have heard of those land deals, which the government auctioned at INR 150 crores and INR 240 crores and these are all land parcels, which are like less than two minutes away from our park. So that market is seeing that kind of traction today given all the demand. To your question with regards to new deals happening, actually, we're closing at 132 now. Some of our older buildings, we're easily getting rentals of around 115. We are able to actually upgrade many of the newly upgraded buildings, we believe will fetch even more. So like I mentioned in the call, our current average rental throughout the park is 80. And whenever any tenant comes up for expiries, we believe we should be able to go to those kind of numbers ranging from 110 to maybe around 132.

Right. This is interesting. The second question is on our recent acquisition. So, the first one among those, the Financial District Square building. Now that we've decided to have Chalet hotels there, there is very little space left there, right? Is this understanding correct? And the follow-up would be that the rentals would start by when for this space? And if I can just continue at Pallikaranai and One Radial, how should we think about occupancy? So last quarter, Pallikaranai was 70%, now it's 74%. What is the idea? The idea here is to maximize rent, the idea here is to fill up some space maybe say, at 80%, 85% and then maximize rent. If you could lay out some strategy as to how should we think about occupancy? That's all from my side.

So this deal with Chalet is 260,000 square feet, which means full tower gets leased. The other tower, we still have around 100-odd thousand square feet vacant, which we are seeing some good amount of inquiries given that the other micro market, Madhapur, institutional vacancy rates are less than 2%. So we should be able to fill that over the next few months. On our Chennai leasing strategy, every time we do a deal, we increase the rentals by around INR 2, INR 3, so that's going to be our strategy. So today, ready space vacancy is around 14.5 lakh square feet, 11 lakhs at One Radial and 3.5 lakh at Commerzone, very active inquiries. I spoke about where a global BFSI GCC is talking to us for nearly 450,000 square feet. There is another Japanese bank, which is talking to us for 100,000 square feet, another engineering company talking to us for 100,000, a global Big Four consulting talking to us of 250,000 square feet, many, many inquiries and the team has kept a sheet in front of me around 14 inquiries right now in the market. And we are reasonably confident this vacant space of 14.5 lakh square feet in both these parks will get leased by end of this financial year.

We'll allow next participant, we have Murtuza Arsiwalla from Kotak.

I just want to check on both these deals with Chalet, what is the kind of rental and what is the kind of capital cost that you will incur? So what's the kind of yield on cost that we are looking at? Also, I'm assuming the Hyderabad one being a sort of repurposed building, it essentially forms part of the completed area whereas Pune will be part of the under construction portfolio that you have or future portfolio that we have in Yerwada.

So whenever we do any deal with Chalet, it's always based on market rentals, and the amount of construction costs we incur. If it is nearly a INR 4,500 kind of construction cost, we charge them an office rental. If it's lesser construction specs because they have their own specs, then we charge on a proportionate basis, lesser rentals. We also believe that there's so many extra benefits we get in a park by doing a hotel deal. The overall halo effect we get from the overall premiumization of the entire park. Today, GCCs, there's so many visitors who keep traveling from across the world who come in. They all want to have a hotel close by. F&B from the hotels help us meeting rooms, training rooms, the entire vibrancy of the park goes up. So multiple advantages we get as office tenants by having a hotel in the park.

Fair. And second, a question for Preeti now, that we've got the government passed the amendment on the tax. Could you just clarify how does Mindspace's taxation sort of get impacted or otherwise because of the most recent amendment?

Right. So I think that's an extremely welcome reform. In fact, we have been representing to the government for the last couple of months for this. So two things happened. Firstly, it enables us to move to the new tax regime. So today, all our SPVs were in the old regime where we were paying taxes between 29% to 35%. The SPVs which had turnover more than INR 400 crores were around 35% tax. So most of the SPVs, especially all the larger ones are at INR 400 plus, so therefore, they were all on 35% tax. So they all move now to, of course, this is all subject to when we move to the new tax regime. So it moves to 28.6% as has been proposed. So that's a big saving, I would say, for Mindspace REIT. Second is, now while this overall is a very positive impact for us, it's not been very material, which is allowing carryforward of MAT credit. We did not have too much MAT credit accumulated. But whatever little we have, we'll be able to carry that forward in the new tax regime. But otherwise, I think both of these are extremely positive development for REITs in general.

Absolutely clear that dividends will remain exempt in the hands of REIT.

Yes, yes, absolutely. Yes, yes. That's what the whole premise was for this reform.

We have Yashas Gilganchi of BOB Capital Markets.

Just building on something a colleague of mine just asked a while earlier. I understand that economic occupancy was down over the quarter as you expanded the complete leasable area by a further 12%. What I would like to understand is how you think the ramp-up of occupancy is likely to be at the portfolio level, say, at what level do you expect to be at the end of this financial year? And also since most of the lease-up is likely to be driven by your assets in Chennai, what pace do you think your in-place rents are likely to grow at over the financial year and maybe even through FY '29?

So in terms of occupancy, right now, without adding our acquisitions, at 95.8%. We believe by end of this year, we will come closer to around 97%, given the traction, which we are seeing in the Chennai market. The other markets, you all know that we don't have much space available in Pune or in Madhapur, like I mentioned in my opening speech. In-place rentals, where every market, we are seeing the market kind of rentals go up. And one interesting thing which I started seeing in the last month or so is companies like JLL today are coming out with relevant stock and relevant vacancy data. We always used to track this 950 million square feet data and say vacancy is 15%. But when we start looking at relevant vacancy, it drops down to 9%, 8%, 7% in all these markets, which basically shows why rentals across all the cities are going up. Two years back, we were doing deals at 75, 78 in Hyderabad. And today, like I mentioned, comfortably doing deals 120, 130 kind of numbers. So we definitely believe in all these markets, rentals will go up. Although our strategy, obviously, is not to lose any client with high rentals. So we still will do the deals and get our occupancies up.

Okay. That's clear. And with approximately 58% of your debt expiring through FY '29, how would you expect your debt composition to change, especially given the volatility in the markets today? Would you expect to lock in a bigger portion of your debt fixed rates?

So I think that will depend on which are the deals coming our way. So we are today at about 60% fixed cost debt at the REIT level and 40% is variable. In between, I would say, for the last couple of months, we actually got into a scenario where variable cost was cheaper than the fixed cost debt. So at that point in time, it made sense to lock in more of variable cost than fixed cost. But I think as we move along, we'll have to keep a watch on the interest rate. And if interest rates are actually cooling off, then obviously, it makes sense to lock for a fixed cost. So we'll keep our strategy flexible to just see what is the most optimal thing for us to do. But as I said, we will keep playing between variable and fixed depending on which is giving us better term. But overall, I would say, as I highlighted in the last time, 60% to 75% fixed cost debt is what we would want to achieve and then keep 20%, 25% flexible for us to keep playing around.

We'll take our next question now from the line of Pritesh Sheth of Axis Capital.

First question on the pre-leasing that we have done in Hyderabad assets, the upcoming ones. What are the rentals that we have clocked there considering that now we are talking about 110 to 130. But just wanted to understand what are the rentals for those pre-leased portion? And second question is on the gap in terms of distribution. I mean, I think since last six, eight quarters, our NDCF is not equal to what we are distributing. And this quarter, I think NDCF from SPV to REIT is, there's a gap of around INR 20-odd crores. So just want to understand the reason for that. And how should we think about the trajectory going forward, yes?

So Hyderabad, with the office buildings, we have a total of close to 32 lakh square feet. That's INR 15 lakhs in one building and INR 17 lakhs in the other. We started leasing around 1, 1.5 years back at around the INR 82 mark. And we have done deals at multiple points, INR 110, INR 115, INR 128 and the last deal is close to INR 132. So that's the range in which we have done the deal. For the NDCF, Preeti can answer.

So particularly for this quarter, you would see some amount getting retained for two, three reasons. The first is in QCT, which is the acquisition which we did last year same time, where we are not able to pull out cash until, of course, we sort out the structure because it's a cash positive entity. And since there's no debt, we're not being able to do ROC. And then because it has accumulated losses, we are not able to pull out. We are already working on a cap reduction and other structuring options to see how we pull out. So that's one reason why some NDCF has remained at the SPV level. Second is mainly, I would say, we have consciously kept aside some money. Not that there is any immediate plan, but for any kind of unforeseen working capital movements, et cetera, which sometimes become difficult to predict, we have kept aside small amount, not that it's any material, but that's been one reason. Similarly, for this quarter also, you will see about INR 30-odd crores has not been distributed. That's again a mix of QCity Malad, that's SPV and also some working capital that we want to keep aside. So broadly, that's the reason.

Got it. So even going forward as well, we should assume 7% to get distributed rather than 10%.

Yes, I would say anywhere around similar number is what you can because it will make sense for us to keep a little aside for any of these unforeseen movements, as I said. But by and large, I would say about anywhere around 96, 97, we've continuously distributed for the last two years and should continue to do so.

Sure. Perfect. And just on Hyderabad again, sorry. So average for the pre-leased area, INR 32 lakh should be 100, 110 on average?

We'll do a calculation and come back to you around that.

Sure, sure. And just on these new developments that we have announced, especially on Airoli West, this is a vacant land we had or we are doing some redevelopment there because earlier.

This is a vacant plan. So this is, like I mentioned, our occupancy in that park is 98% plus. There's no space available. All the tenants who are there have, some of them have expansion plans. Some of them will definitely have been asking us, do you have any space there. So that was the logic. We have some excess land where we're building this asset.